U.S. Porsche Stores Pure Gold With Double Buick’s Sales

Attendees sit in a Porsche AG vehicle during the 2013 North American International Auto Show (NAIAS) in Detroit. Photographer: David Paul Morris/Bloomberg

July 15 (Bloomberg) -- When a cluster of Minneapolis
luxury-car dealerships went up for sale last year, one brand was
prized above the Mercedes-Benz and Audi stores.

“Porsche was the cherry on the cake,” Jay Hulbert, the
president of the dealership group that acquired the outlets,
said in a telephone interview. “The volume is so dramatically
different, yet when you dig into the financial performance,
Porsche meets your expectations and then some.”

For decades, Porsche AG took Henry Ford’s any-color-so-long-as-it’s-black approach. It offered only high-end, two-door
sports cars. The addition of a second sport-utility vehicle to
the lineup later this year, after a decade in which Porsche
introduced its first SUV and four-door sedan, is heightening the
interest of dealers who used to view the franchises mostly as
trophy stores.

AutoNation Inc., Penske Automotive Group Inc. and Asbury
Automotive Group Inc., three of the largest new-car retailers in
the U.S., all have purchased Porsche franchises since 2010. In a
period of sparse activity for auto-dealership acquisitions, the
deals vaulted Porsche among the most frequently acquired
franchises by publicly traded groups during that span.

The unit of Volkswagen AG, which took control of the
Stuttgart, Germany-based automaker last August, has capped its
U.S. dealer count as it expands its lineup, pushing its sales
per franchise past higher-volume brands including Chrysler and
Cadillac. Plus, Porsche models such as the 911 sports car
command margins among the highest in the industry.

Anxious Buyers

“If a dealer wanted to sell, I have 10 buyers willing to
overpay” for a Porsche franchise, said Bob Morris, a director
at auto-dealership brokerage Tim Lamb Group LLC.

While some Porsche aficionados chafe at the lineup’s
expansion, seeing SUVs and four-door sedans as a violation of
the brand’s principles, the value and profitability of the
Porsche franchise has changed more dramatically than for any
brand in the industry in the last 20 years, said Alan Haig,
managing director for Presidio Automotive, which advises dealers
who are looking to sell their stores.

“There aren’t that many sports-car buyers in the world,”
said Haig, who previously oversaw acquisitions at AutoNation,
the largest U.S. auto-dealer group. “Many Porsche stores were
bought almost as a toy for the dealer, for him to have something
nice to drive and to go on nice trips. But it wasn’t a serious
money-making investment.”

Cayenne’s Impact

That changed when the brand introduced the Cayenne SUV,
which debuted in the U.S. market in 2003. Porsche transformed
from drawing wealthy males to attracting well-off families who
could justify paying $60,000 for an SUV that drove more like a
sports car than a truck.

“They combined the strength of Porsche in terms of
performance with what the market wanted, which was capacity to
handle a family or grocery shopping or maybe pulling a boat,”
Haig said in a telephone interview.

Next came the Panamera, the four-door sedan that Porsche
began building in 2009. It attracted the 50- and 60-something
buyer who wanted to be able to stow golf clubs or drive friends
comfortably to dinner instead of squeezing into a coupe.

While Porsche offerings expanded, the number of Porsche
dealerships in the U.S. has shrunk slightly to 189 today, from a
little more than 200 in 2009, said Detlev von Platen, president
and CEO of Porsche Cars North America Inc.

The simultaneous moves have done wonders for Porsche’s
sales per franchise, a figure that’s crucial to dealers and is
referred to within the industry as throughput.

Porsche Throughput

Porsche’s throughput climbed to 183 vehicle sales per
franchise last year, a 23 percent increase from a year earlier,
according to Automotive News Data Center. Porsche franchises had
better throughput than Chrysler Group LLC’s namesake brand or
General Motors Co.’s Cadillac and they more than doubled those
of GM’s Buick and Ford Motor Co.’s Lincoln.

This year, Porsche is on pace to exceed 200 sales per
franchise on surging demand for its Boxster and Cayman sports
cars and the Cayenne. The brand’s U.S. deliveries increased 30
percent in the year’s first six months, paced by a 47 percent
jump for Cayenne and tripling of Boxster and Cayman deliveries.

Even as the brand’s sales have risen thanks in part to
entry-level Cayennes that start at less than $50,000, Porsche
dealers still sell enough of the brand’s higher-end models to
produce eye-popping margins within the auto-retail industry.

Dealer Profit

Presidio’s Haig estimates that a Porsche dealer may make
about $10,000 per new vehicle. By comparison, a Ford dealer
probably would make about $4,000 on a high-end pickup, and
dealers for Toyota Motor Corp.’s Lexus luxury brand likely
average $3,000 apiece.

“We haven’t seen a scintilla of compromise with respect to
the brand promise and brand equity in the decisions that they’ve
made,” said Greg Goodwin, chief executive officer of the West
Coast dealer group Kuni Automotive, which bought a Porsche store
in San Diego in 2011.

The lure of owning a Porsche dealership also extends into
the service bay. The company’s models are some of the world’s
most highly engineered vehicles, making it difficult for
independent repair shops to compete with dealers.

Porsche owners also have a reputation for wanting to
maintain their cars well.

Private Autobahn

Porsche is revealing the Macan small SUV at the Los Angeles
auto show later this year that extends the brand into another
segment. Once the Macan is on the market, SUVs may account for a
little more than half of Porsche sales, Von Platen said.

On top of the new product, Porsche is building a new
headquarters in Atlanta that will include a test track and
delivery center. Dealers will be able to send customers there or
to a Porsche Experience Center that’s also under construction in
the Los Angeles area.

This will give owners a chance to push the limits of sports
cars that can churn 560 horsepower and reach top speeds of
almost 200 miles (322 kilometers) per hour.

“You can’t really benefit from any of that unless you’re
severely violating the law,” Haig said. “They see this as a
matter of there being no Autobahn in the U.S., so let’s just
build our own.”